What are the benefits of life insurance?
Ensuring that your family is protected and taken care of - particularly while moving home - is a priority for everyone. Life insurance helps with exactly that. But what is life insurance, and what does it cover? Find out in this post.
Ensuring that your family is protected and taken care of is a priority for everyone, therefore life insurance is certainly something you should consider. Life insurance can give you peace of mind knowing that your family would receive substantial financial support in the event that you passed away.
What is life insurance and what does it cover?
Life insurance is an insurance policy which gives your family a financial payout if you pass away. How much cover and the payout you receive will depend on your policy and individual circumstances.
The premiums tend to be lower the younger you are, and you’re more likely to be offered competitive policies if you’re in generally good physical shape. In many instances, life insurance payouts are used to settle outstanding mortgages, but are also commonly used towards day-to-day spending such as bills, food shopping, and other costs associated with raising children. Alternatively, it could be a nice way to treat your loved ones one last time.
Life insurance benefits
Life is uncertain, and life insurance can help provide some financial certainty, so let’s take a look at some of the benefits that life insurance provides.
Proceeds can be used to settle debts
A mortgage is quite possibly the largest single debt anyone has followed by car loans and credit card debt. As life insurance policies provide a lump sum payment on your demise, this can be used to settle all outstanding debts so your family don’t have to deal with the financial burden.
Loss of earnings cover
For many couples, one person earns a higher salary than the other, which means that if you were to pass away, your other half would be faced with a large loss of earnings. This is particularly difficult when you’ve got kids. In some cases, there is only one main earner in the family, so this could mean a complete loss of income. With a life insurance policy, the payout could compensate for the loss of earnings and help fund the deficit in monthly income.
Peace of mind
It’s hard not to worry about your family, and financial security for your family is possibly one of the most important priorities later in life. The fact that life insurance means your family will be financially taken care of can lift a huge weight off your shoulders, and you can focus on actually living your life and being with your family knowing that if you die, they’d still be financially secure.
Children’s education
The education of your children can be very costly, especially if they decide to go to university. With university tuition fees costing up to £9,250 per year, along with other costs such as accommodation, going to university can cost tens of thousands of pounds. Having a life insurance policy can mean that your children will be able to go to university and further higher education without the worry and stress of the financial implications such as student loans.
Additional insurance benefits
Many life insurance providers also offer different policies such as disability insurance and critical illness cover. When purchasing a “bundle”, you can stand to receive substantial discounts along with the benefit of being covered for other ailments. Disability insurance provides monthly cover if you’re unable to work as a result of becoming too ill or are unable to work. Critical illness cover, on the other hand, provides you with a lump sum payment in the event of being diagnosed with a serious illness such as organ failure.
Tax-free payout
Life insurance lump sums are tax-free, so any monies received by your loved ones will not be considered as income for tax purposes.
Cash accrual
Some life insurance policies, known as “cash value” policies, offer an investment component as part of the policy. Your policy is able to earn interest, which can then be withdrawn or borrowed against if you need funds in an emergency. While this shouldn’t replace your normal retirement account or pension, it can be an additional safety net for you and your family.
Summary
With so much uncertainty in the world today, it’s important to try to “fix” certain parts of your life so that no matter what happens, your family are protected. In the case of life insurance, it can be said that this is the ultimate form of financial protection for your family if you pass on, as it could mean that all their financial worries and obligations are taken care of in a very short space of time.
The passing of a loved one can be a traumatic and extremely difficult event to deal with, and the additional financial stress and worry only make the worries worse. There are many benefits to life insurance, from being able to settle all outstanding debts so your family don’t have to worry, to ensuring your children’s education is fully paid for. A life insurance policy can be one way of reducing the strain on your family; knowing that there won’t be financial worries can provide some peace of mind during a difficult time in their lives.